Investment Sale & Brokerage - Appropriate Comp Structure and Commission Fee Split?
I’m currently working in brokerage/investment sales at a mid-level position and wanted to get some insight from others in similar roles. Have any of you negotiated or asked for a percentage of the commissions earned by your team?
If so, how did you approach the conversation, and what kind of percentage did you end up with? I’m curious about industry norms (if there are any) and what’s considered fair or reasonable for someone contributing significantly to deal underwriting, analysis, and closing processes.
Background: Worked as analyst -> senior analyst -> associate -> vp (current with 6 YOE)
Responsibilities: Manage full team of analysts and associates as well as aiding in escrow and deal process (touring clients and taking a deal from start to finish). Also assisting with valuations and operations on over $400 million retail, office and multifamily closed for the team.
Current Comp: $120k base + ~10% bonus per year (seems a bit low but I work around 50-55 hour weeks)
Area: HCOL similar to LA, SF, NY
Based on the most helpful WSO content, here's what you need to know about compensation structures and commission splits in brokerage/investment sales:
Industry Norms for Commission Splits:
Negotiation Approach:
Fair Compensation for Your Role:
Additional Insights:
In summary, your contributions warrant a higher comp structure. A 10-15% commission split or a significant increase in your bonus percentage would align better with industry norms for your role and market.
Sources: Commercial Real Estate Broker Compensation, Let's Talk About Broker Compensation, BROKERS: What Is Your Compensation In Real Estate?, Brokerage: Why not start your own firm?, So you want to be a CRE Broker?
Curious to hear from anyone in the brokerage industry. Seems like there aren't many data points to go off of.
Without speaking to your situation specifically, almost the entire value of an investment sales 'team' is in the MD who originated the engagement. The blocking and tackling (calculating T-3 NOI, pulling comps on Costar, uploading seller's DD to a dataroom, compiling an OM, performing property tours, etc) is a tiny share of the actual value-add, because frankly a lot of people can do that. And if you don't think $130k/yr is 'fair', I think they can find others who do.
Just my two cents.
Our team does does the most transaction volume and deals in our office and region. I'm the lead and associate VP who directs all deals in our pipeline (20+ agents) and also handle the sale process from start to finish. I not only assist with building the valuations with my team of analysts/associates but I take potential clients and buyers through properties while taking a deal to the end of the escrow. Figuring out solutions to problems that come up throughout the escrow period and connecting buyers/sellers. Not sure if this would increase the potential pay.
I'm not really in the job market, but your comp seems terrible for a VP with 6 YOE. As a data point, when I was a 2nd year development associate ~3 years ago, my base was $125k in a similar HCOL. Didn't make it to bonus but prob 10%-20%. Hours were similar to yours
Depending on your team’s productivity, you should be getting around 50% to 100% bonus in a good year as an experienced analyst with 3+ YOE. If you’re the lead analyst or experienced associate, you should crack $200k all in and have bonus directly tied to team commissions on a percentage basis.
Comp structure should shift to less base pay (if any) and a larger percentage of deal fees for the projects you’re executing on. VP and up, you should be making at least $200k, maybe over $300k if you’re on a good team. This excludes rainmakers, sub-institutional product teams, and Eastdil.
Reference point is investment sales / capital markets in Southeast US. HCOL market I’d imagine is at least 20-30% higher than ranges I quoted. These numbers are also less achievable in a down market…
Would your comp numbers be applicable to the Carolinas/GA region?
Agree with the others saying you are underpaid. It is not a straight forward answer however, and would recommend you do some math based on the below - I did a similar analysis when I was negotiating with my team.
Assuming you know your team splits within the team and with the brokerage, I would do some math to figure out how much the brokers on your team are making in a poor year, standard year, and great year. Do some math that sees what split of the team fees you could take that would result in you still making less than any of these people senior to you, even in a poor year (remember to deduct the % of fees you are taking from the rest of the team from what the current split is).
So for an example, say your team is at $2mm in gross fees, $1mm in net fees after the brokerage takes its cut. If a senior broker, mid-senior broker, you, and an analyst, I would assume it would be broken up something like this:
Senior broker: 50% of fees = $500k
Mid-senior broker: 30-40% of fees = $300-$400k
You: 10% of fees = $100k + your $120k salary (which they will use as a knock against you getting a higher split assuming they are fully commission “we are taking on more risk”) = $220k
Remainder: 0-10% = $0-100k that can be divided up based on the team dynamic and who brings the most value to the table. 5% of this would typically go to the analyst(s) pool depending on how high their salaries are and how long they’ve been with the team.
If $1.5mm in net fees, it would look like this:
Senior broker: $750k
Mid-senior broker: $450-$600k
You: $120k + $150k = $270k
Remainder: $0-$150k
If $750k in net fees:
Senior broker: $375k
Mid-senior broker: $225k-$300k
You: $120k + $75k = $195k (this is where it gets tricky because you would potentially be getting close to what the mid-senior guy is making)
Remainder: $0-75k
Play around with the math based on # of team members and your average fees produced. Gets trickier if there is any deadweight on the team that doesn’t add much value but still has to get paid - may be a reason to look for other opportunities.
Hope this helps!
Thank you for the advice on this! Our team actually grosses over $8mm to $10mm in net fees annually after the brokerage takes its cut. We have a few analysts/associates but they're all paid around the $80-90k range with maybe $3-5k bonuses regardless of how many deals we close. I don't want to look too greedy asking for a percentage of equity and feel like this is something most brokers do not want to give up. Our top three senior brokers are pulling in at least $3-4m each on an annual basis. So far, the team structure looks like this:
Senior brokers: $3-4m+
Junior brokers: $0 - $300k based on deals closed
Analysts/Associates: $80-90k each
Remainder: $120k + maybe 10% bonus
Got it, yeah definitely gets a bit hairier with a team that size. If I was in your shoes I think the easiest route would be to take one of your senior team members for lunch and ask them what the process would look like to transition to a brokerage role. Or discuss it during your year end review if easier and less pressure. If you want to keep your salary and not go full commission just yet, say that you want to keep your more analytical duties, but help out on the sales side of things and maybe take the lead on some of the smaller deals to learn the ropes before being thrown to the wolves (they will like this as it frees up their time to manage the larger deals/clients).
With your YOE I don’t think this will sound greedy at all. Find comfort in the fact that they are brokers that ask clients every day to give them a % of a sale for their work, and you’re effectively doing the same thing but internally. It would be hypocritical for them to get offended by this and the worst they can do is say no.
Good luck!
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